StateOfTheNation2012 May16 Eng

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A d v i s o r y C o u n c i l t o t h e G o v e r n m e n t o f C a n a d a

S c i e n c e , Te c h n o l o g y a n d I n n o v a t i o n C o u n c i l

State o f the Nat ion

Canadas Science, Technologyand Innovation System:Asp i r ing toG loba l Leader sh ip


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State of the Nation 2012Canadas Science, Technology and Innovation System: Aspiring to Global Leadership

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A d v i s o r y C o u n c i l t o t h e G o v e r n m e n t o f C a n a d a

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State o the Nat ionCanadas Science, Technologyand Innovation System:Asp i r ing toG loba l Leader sh ip


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Science, Technology and

Innovation CouncilMandate and Members

Science, Technology and Innovation Council: Mandate and Members

The Science, Technology and Innovation Council (STIC) was created in 2007 to serve as the Government

o Canadas external advisory body in the domain o science, technology and innovation (STI). The Council hasa dual mandate: to provide the government with condential advice on STI policy issues critical to Canadas eco-nomic development and societal well-being; and to produce biennial public reportsState o the NationmeasuringCanadas STI perormance against international standards o excellence.

Current Members

Howard Alper Chair, Science, Technology and Innovation CouncilDavid Agnew President, Seneca College

Amit Chakma President, Western UniversitySophie Forest Managing Partner, Brightspark VenturesGeorge Gosbee Chairman and CEO, AltaCorp Capital Inc.Arvind Gupta CEO and Scientic Director, Mitacs Inc.; Proessor o Computer Science,

University o British ColumbiaMaureen Kempston Darkes Group Vice President, General Motors Corporation (retired); past President and

General Manager, General Motors o Canada LimitedSimon Kennedy Deputy Minister o International Trade, Foreign Aairs and International Trade CanadaJohn Knubley Deputy Minister, Industry CanadaTerence Matthews Chair, Mitel; Chair, Wesley CloverHeather Munroe-Blum Principal and Vice-Chancellor, McGill University

Simon Pimstone President and Chie Executive Ocer, Xenon Pharmaceuticals Inc.Indira S. Samarasekera President and Vice-Chancellor, University o AlbertaMolly Shoichet Canada Research Chair in Tissue Engineering; Proessor, University o TorontoAnnette Verschuren Chair and CEO, NRStor Inc.Rob Wildeboer Executive Chairman, Martinrea International Inc.Glenda Yeates Deputy Minister, Health Canada


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* Aliations noted are those at the time o the members terms on STIC.

Past Members*

(active on Council during part o the period since the release o State o the Nation 2010)

Eric Bergeron President and CEO, Optosecurity Inc.Richard Dicerni Deputy Minister, Industry Canada

Marye Anne Fox Chancellor Emerita, University o Caliornia, San DiegoLouis Lvesque Deputy Minister, International TradePeter MacKinnon President and Vice-Chancellor, University o SaskatchewanDavid P. OBrien Chair, Encana Corporation; Chair, Royal Bank o CanadaJ. Robert S. Prichard Vice-Chair, Science, Technology and Innovation Council; Chair, Torys LLPGuy Rouleau Canada Research Chair in Genetics o the Nervous System; Proessor, Department o Medicine,

Universit de Montral; Director, Research Centre, Sainte-Justine University Hospital CentreNeil Turok Director, Perimeter Institute or Theoretical Physics


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Contents

Science, Technology and Innovation Council: Mandate and Members ...................................................iii

Executive Summary ...................................................................................................................................1

Chapter 1: IntroductionCanadas Perormance in Perspective .............................................................5Role o the Report ..................................................................................................................................................... 6What We Measure ..................................................................................................................................................... 6The Perormance Story .............................................................................................................................................. 7

Chapter 2: Understanding Science, Technology and Innovation ............................................................13Dening the Concepts ............................................................................................................................................ 13The Importance o Science, Technology and Innovation .......................................................................................... 14

Productivity Growth ................... ..................... ..................... ..................... ..................... ...................... ................ 14Employment Growth and Firm Creation .................. ..................... ..................... ..................... ...................... ......... 17Health, Environmental and Social Challenges .................... ..................... ..................... ..................... .................... 18

The Science, Technology and Innovation Ecosystem and its Key Players .................................................................. 19Government Sector .................... ..................... ..................... ..................... ..................... ...................... ................ 19Higher Education Sector .................... ..................... ..................... ..................... ..................... ...................... ......... 23Business Sector ................... ..................... ..................... ..................... ..................... ...................... ..................... .. 24

Characteristics o the Modern STI Enterprise ............................................................................................................ 24Internationalization ................... ..................... ..................... ..................... ..................... ...................... ................ 24Collaboration .................. ...................... ..................... ..................... ..................... ..................... ..................... ...... 25

Conclusion .............................................................................................................................................................. 25

Chapter 3: Canadas Funding or Research and Development in an International Context ..................27Canadian Research and Development in a Global Context ...................................................................................... 27Funders o Research and Development in Canada ................................................................................................... 28Government Funding or Research and Development .............................................................................................. 31

Federal Funding o Research and Development ..................... ..................... ..................... ..................... ................. 31Provincial Funding o Research and Development ...................... ..................... ..................... ..................... ............. 34

Business Funding o Research and Development ...................................................................................................... 36

Chapter 4: Business Innovation...............................................................................................................41Innovation through Research and Development ...................................................................................................... 42

Business Perormance o Research and Development .................... ..................... ..................... ..................... .......... 42Changes in Research and Development Perormed by Industries in Canada ..................... ..................... ................. 45International Comparison o Research and Development Intensity by Industry Sector .................... ..................... ... 46Industry Structure .................. ..................... ..................... ...................... ..................... ..................... .................... 47Research and Development by Firm Size .................... ...................... ..................... ..................... ..................... ...... 49

Innovation through Investments in Machinery and Equipment and Intangible Assets .............................................. 49Investments in Inormation and Communications Technologies .................. ..................... ..................... ................. 50Investments in Intangible Assets .................. ..................... ...................... ..................... ..................... .................... 52Trademarking Innovations............................... ..................... ..................... ..................... ..................... ................. 54

Contents


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Supporting Innovation through Equity Financing ....................................................................................................55Canada in International Rankings ..................... ..................... ..................... ..................... ...................... .............. 56Characteristics o the Canadian VC Landscape .................... ..................... ..................... ..................... .................. 57Venture Capital by Industry in Canada ..................... ..................... ..................... ...................... ..................... ....... 58

Venture Capital Exits and Market Capitalization.................. ..................... ..................... ...................... .............. 59Innovation and Global Connectedness .................................................................................................................... 60

International Technology Flows .................. ..................... ..................... ..................... ...................... ..................... 61

Chapter 5: Knowledge Development and Transer.................................................................................63KNOWLEDGE DEVELOPMENT ................................................................................................................................. 63Measuring Canadas Scientic Outputs .................................................................................................................... 64

Bibliometric Quantity Indicators ..................... ..................... ..................... ..................... ..................... .................. 65Bibliometric Impact Indicators .................... ..................... ..................... ..................... ...................... ..................... 66Structural Indicators ..................... ..................... ..................... ..................... ..................... ...................... .............. 68

Measuring the Perormance o Canadas Universities ...............................................................................................68KNOWLEDGE TRANSFER ......................................................................................................................................... 69Demand-Pull Knowledge Transer ............................................................................................................................ 71

Knowledge Transer through Contract Research ................... ..................... ..................... ..................... .................. 71Supply-Push Knowledge Transer ............................................................................................................................. 72

Licensing Technologies ..................... ..................... ..................... ..................... ..................... ..................... ........... 72

Spino Companies .................... ..................... ..................... ..................... ..................... ..................... .................. 75

Chapter 6: Talent Development and Deployment ..................................................................................77TALENT DEVELOPMENT .......................................................................................................................................... 78Preparing our Young Talent ..................................................................................................................................... 78

Secondary Student Enrolment .................... ..................... ..................... ..................... ...................... ..................... 78Secondary Student Perormance ..................... ..................... ..................... ..................... ..................... .................. 78Engaging Secondary Students in Science and Technology.......................... ..................... ..................... .................. 79

Supply o Advanced Skills: College and University Education ................................................................................... 80College Education ..................... ..................... ..................... ..................... ..................... ..................... .................. 81University Education (All Levels) ..................... ..................... ..................... ..................... ..................... .................. 81Undergraduate and Masters Level Education .................. ..................... ..................... ...................... ..................... 82

Canadas Top Talent Supply: Doctoral Education .................... ..................... ..................... ...................... .............. 84Education o Canadas Entrepreneurs and Business Leaders ..................................................................................... 86Work-Integrated Learning ........................................................................................................................................ 90Mobile Talent in a Global Economy ......................................................................................................................... 91

Contributors to the Diplomacy o Knowledge ..................... ..................... ..................... ..................... .................. 92Attracting International Students to Canada ................... ..................... ..................... ...................... ..................... 92Attracting Highly Educated Immigrants to Canada ..................... ..................... ..................... ..................... ........... 93

TALENT DEPLOYMENT: MAKING THE MOST OF OUR TALENT ................................................................................ 94Success in the Labour Market .................................................................................................................................. 95

Making the Match: Canadas Absorption o its Well-Educated Workorce .................... ...................... ..................... 95Deploying Canadas Science, Technology and Innovation Talent ............................................................................. 96Gender Balance in Science, Technology and Innovation Leadership ......................................................................... 98

Chapter 7: Conclusion and the Way Forward .......................................................................................101

Appendix A: Granting Council Funding or Science, Technology and Innovation Sub-Priority Areas ....105

Appendix B: Glossary o Terms .............................................................................................................107


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Executive Summary

The Science, Technology and Innovation Council

(STIC) has been mandated by the Government oCanada to produce a biennial report tracking, assessingand internationally benchmarking this countrys science,technology and innovation (STI) perormance. In thisthird report, State o the Nation 2012Canadas Science,Technology and Innovation System: Aspiring to Global

Leadership, we track where Canada is making progressand identiy areas where Canada must devote greaterattention to enhancing perormance. Understandingthis picture contributes to advancing the national STIdialogue, building consensus around avenues or urgent

action, and generating the will to work strategically andcohesively towards common goals.

Science, technology and innovation underpin andanimate virtually every aspect o modern lie, drivingeconomic growth and prosperity and uelling advancesthat enhance health, environmental and social well-being. Canadians understand that, i we want to createjobs and opportunity in a competitive world and addressthe key societal challenges that conront us in the21st century, STI must be an integral part o the national

agenda. Canadas relatively sound economic positionprovides us with an opportunity to build on and takebetter advantage o those STI areas where we are strongand enhance our perormance in those areas where weare weakto reach or global STI leadership and therebyreap the resulting economic and societal benets.

As in the 2008 and 2010 reports, State o the Nation 2012examines Canadas unding or research and develop-ment (R&D) in an international context and Canadasperormance on key indicators related to business innov-ation, knowledge development and transer, and talentdevelopment and deployment. The ndings in State o

the Nation 2012 reinorce much o what was learned inthe previous reports: Canada has much to celebrate withrespect to the high quality o our talent and our strengthin generating new knowledge. However, there are vitallyimportant areas where our perormance is lagging,where we must improvein some cases signicantly.

We cannot be satised with the status quo or with incre-mental progressconcerted action is needed to reachor global leadership.

State o the Nation 2012 shows that Canadas gross

domestic expenditures on R&D (GERD) declined romtheir peak in 2008 and, when measured in relation togross domestic product (GDP), since 2001. In contrast,the GERD and GERD intensity o most other countrieshave been increasing. Canadas declining GERD intensityhas pushed its rank down rom 16th position in 2006 to17th in 2008 and to 23rd in 2011 (among 41 econ-omies). While there have been shits in unding amongsectors in Canada over time, the more recent declines inthe countrys total R&D unding eorts are attributablepredominantly to private sector unding o R&D.

Executive Summary


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Business Innovation

Business innovation is an engine o productivity growth,increased international competitiveness and higher livingstandards. It is underpinned by investments in R&D,machinery and equipment (especially inormation andcommunications technologies (ICT)) and intangible

assets. While we recognize that innovative activity isoccurring that is not captured in ocial data, it is none-theless clear in State o the Nation 2012 that Canadianrms are not suciently harnessing innovation to makecompetitive gains. In international rankings related tobusiness innovation, Canada continues to place in themiddle o the pack on most measures and, on someindicators, Canadas rank has declined.

Canadas perormance is particularly poor on measureso business enterprise expenditures on research and

development (BERD)that is, the R&D perormed byrms. Although preliminary data suggest that BERD inCanada increased very slightly in both 2011 and 2012,BERD intensity (i.e., BERD as a percentage o GDP) hasbeen in almost continuous decline or the past decade.Canadas rank among comparator countries on BERD-to-GDP ell to 25th in 2011 (o 41 economies). WhereCanadian business has perormed better is in its undingo R&D in the higher education sector. On this measure,Canada ranked seventh among comparator economies,with signicantly better perormance than the U.S.

and Japan.Although Canadian business investment in ICT is grow-ing, on the international measure o ICT investmentintensity (i.e., ICT as a percentage o non-residentialgross xed capital ormation), Canada still ranks inthe middle among countries o the Organisation orEconomic Co-operation and Development (OECD).O particular concern, Canadas ICT investment gap withthe United States (U.S.) is increasingICT investmentintensity in the business sector in Canada averaged only42 percent o U.S. levels over the period rom 2000 to2010. Canada also perorms poorly on venture capitalinvestment as a share o GDP, ranking 15th out o 27comparator countries. As the Government o Canadaconsiders recommendations to modernize its rame-work policies in support o increased competitiveness,Canadian rms have to become more innovative inorder to maximize their success in the global economy.

Knowledge Development and Transer

The development o knowledge is the root o a countrysSTI ecosystem. Higher education expenditures on R&D(HERD) in Canada have increased signicantly since thelate 1990s, to reach $11.5 billion in 2012. Canadassubstantial investment in the higher education sector

has reaped signicant rewards, as the production andrenement o scientic knowledge in Canada continuesto be characterized by vitality and high quality. With ashare o only 0.5 percent o global population, Canadaaccounted or 4.4 percent o the worlds natural sciencesand engineering publications in 2010. This positionsCanada eighth ater countries with signicantly largerpopulations: the U.S., China, Germany, the UnitedKingdom, Japan, France and Italy.

But Canada continues to ace chronic challenges in

knowledge transerin eectively moving knowledgedeveloped in higher education institutions to companiesthat have the ability to absorb it and translate it intocommercially viable products and/or solutions tohealth, environmental and social problems. The mostimportant orm o knowledge transer is on two eet,via the movement and interplay o people through, orexample, students internships in companies, graduatesemployment in the workorce or industry-academiaR&D collaboration. We know that there is a great dealo activity in Canada in these areas that is not refected

in available data, especially internationally comparabledata. However, on the traditional indicators o know-ledge transer related to licensing activities and spinocompanies, where some limited international compari-sons are possible, Canada continues to show disappoint-ing results.


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The most recent data available show stagnation inCanadian licensing activities and suggest that U.S.institutions are generally more successul than Canadianones at creating licences, keeping them active andearning income rom them. Similarly, while there wasan increase in spino companies rom higher educationinstitutions in 2011a promising signthere was a gen-eral downward trend in spino creation between 2000and 2010. Improvement in Canadas knowledge transerperormance will be vital to ensuring that discoveries aretranslated into practical economic and societal benetsor Canadians.

It is important to note, too, that while HERD in Canadahas been growing in dollar terms, the HERD-to-GDPratio has fuctuated, declining to 0.66 percent in 2011rom its peak o 0.71 percent in 2009. In 2011 (the lat-est year or which international comparisons are avail-

able), while Canada continued to rank rst in the G7 inHERD-to-GDP, its relative position deteriorated againstthe broader comparator group o economies. That yearCanada ranked ninth out o 41 economies in HERDintensity (i.e., HERD-to-GDP), down rom ourth in 2008and third in 2006. With their signicant investmentsin research and higher education, other countries arecatching up and overtaking Canada.

Talent Development and Deployment

Science, technology and innovation are undamentally

human activities, making talent the key competitivedierentiator in the global knowledge-based economy.On the talent ront, Canadas highly-educated popula-tion continues to be an asset, with 51 percent o theadult population having attained a university or collegeeducation, one o the highest levels in the world.

A countrys ability to produce doctoral graduates isan indicator o its potential to engage in cutting-edgeresearch and to train the next generation o talent.Canada continues to produce ewer doctoral gradu-

ates (per 100,000 population) than many comparatorcountries, ranking 21st in the OECD on this indicator in2010. However, Canadas perormance that same yearwas better with respect to science and engineering doc-toral graduates (per 100,000 population), on which itranked 15th among OECD countries. Between 2006 and

2010, Canada experienced 48.7 percent growth in thenumber o science doctoral graduates and 38.6 percentgrowth in the number o engineering doctoral gradu-ates, growth rates notably surpassing those o manycomparator countries.

But Canada cannot aord to be complacent. With

other countries making signicant investments in theirresearch and education systems, Canada risks erosiono its competitive talent advantage. Canada could alsodo more to ensure that its talent is prepared to contrib-ute ully to an innovative, productive and competitiveeconomy, by nurturing talent that better understandsthe links between STI and business. Expanding the num-ber o programs providing post-secondary students withwork-integrated learning opportunities in companiesand applied research projects, through internships orexample, would contribute to this objective.

Canada also needs to do much better at deploying itsSTI talentthat is, eectively absorbing this talent intothe labour orce and utilizing its knowledge and skills toull advantage. On this ront, Canadas perormancerefected in the measure o employing human resourcesin science and technology (HRST) in the labour orcecontinues to disappoint. Canadas HRST share o theservices labour orce is 39 percent, positioning Canadain the middle ranks among OECD countries on thismeasure. On manuacturing, the picture is dismaltheHRST share o the manuacturing labour orce in Canada,at 11.5 percent, is among the lowest in the OECD.

Executive Summary



Conclusion

To a signicant extent, Canadas success in the 21st cen-tury will be determined by our ability to harness science,technology and innovation to drive economic prosperityand societal well-being. STIC believes that Canada muststrive not only or excellence in STI but also or global

leadership. Realizing our ull STI potential in this way willhelp us build strong institutions, companies, industriesand communities, and position us among the worldsmost prosperous, healthy and secure countries.

To refect this ambition, in State o the Nation 2012we have gone beyond examining OECD and othercomparator countries (as we did in previous reports) toidentiy, on key internationally comparable STI indicators,the threshold that Canada would have to attain in orderto break into the ranks o the worlds top ve perorming

countries. We have gone still urther to highlight veparticularly important STI indicators on which Canadashould aspire to join the ranks o the worlds top veperorming countries:

BERDasashareofGDP;

businessinvestmentinICT;

HERDasashareofGDP;

scienceandengineeringdoctoraldegreesgrantedper

100,000 population; and

shareofhumanresourcesinscienceandtechnology.

Attaining the highest standards o international excel-lence in these ve aspirational indicators will helpsecure Canadas uture as a global STI leader, allowingus to reap greater economic and societal benets orCanadians and contribute meaningully to addressingkey challenges aced by the global community. To real-ize this goal, all participants in our STI ecosystem mustassume responsibility. We must work together not onlyto invest more in STI, but to invest more strategicallyand coherently, learn rom the experience o global STIleaders, and be more agile seizing opportunities. That ishow Canada will truly be able to run with the best.


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1 Economic and Development Review Committee o the OECD, OECD Economic Surveys: Canada, Paris (June 2012), p. 2.2 World Economic Forum, The Global Competitiveness Report 20122013, Geneva (2012).

C h a p t e r 1 : IntroductionCanadas Perormance in Perspective

IntroductionCanadas Perormance in Perspective

Success in the 21st century is driven by excellence

in science, technology and innovation (STI)by pushingthe boundaries o knowledge and by applying discover-ies to produce new or improved products and processes.Science, technology and innovation underpin andanimate virtually every aspect o modern lie. The mostcompetitive economies are built on the recognition thatSTI drives growth, prosperity and high quality o lie.

Canadians understand that, i we want to create jobsand opportunity in a competitive world and address thekey challenges that conront us in the 21st century,STI must be an integral part o the national agenda.Success requires a private sector that embraces innov-ation as a competitiveness strategy; education andresearch institutions that attract and nurture world-classtalent; researchers who expand the rontiers o know-ledge; and governments that provide the environmentand the support to enable discovery and commercializa-tion to thrive.

Despite some persistent challenges, such as increas-ing household debt and sluggish employment growth,Canada has weathered the economic storm better thanmost. In the ace o a challenging global environment,Canada has managed to maintain its modest eco-nomic growth, its relatively healthy scal position, and

a nancial system that is a model or the world. In itsJune 2012 Economic Survey o Canada, the Organisationor Economic Co-operation and Development (OECD)highlighted that Canada has weathered the globaleconomic crisis well, mainly refecting sustained growthin domestic spending, and the economy is continuingto grow despite the persistence o international tur-bulence.1 As well, the World Economic Forum (WEF)noted in its Global Competitiveness Report 2012-2013that Canada eatures among the most competitiveeconomies worldwide, pointing to strengths such as

Canadas highly ecient goods, labour and nancialmarkets (especially the soundness o Canadas banks),high-quality human capital, excellent inrastructure, andstrong, well-unctioning and transparent institutions.2

Canadas relatively strong economic position providesus with an opportunity that we must seizethe oppor-tunity to get out ahead o our competitors by buildingon and taking better advantage o those STI areas wherewe are strong and enhancing our perormance in thoseareas where we are weak. In realizing our ull STI poten-

tial, we will reap greater economic and societal benetsor Canadians and contribute meaningully to addressingkey challenges shared by the global community. To real-ize our ull STI potential, Canada must not only investmore, but invest more strategically and coherently,building on our current strengths, and capitalizing onemerging opportunities.

Science, technology and innovation drive

growth, prosperity and high quality o lie.



Role o the Report

The Science, Technology and Innovation Council (STIC)has been mandated by the Government o Canadato produce a biennial report assessing this countrysSTI perormance, highlighting, where data availabilityallows, comparisons to other advanced and emerg-

ing economies. This enables us to benchmark our STIstrengths and weaknesses against international stan-dards o excellence.

Our inaugural report, State o the Nation 2008, providedthe baseline rom which Canadas STI perormance couldbe measured. State o the Nation 2010 built on thatoundation by tracking Canadas perormance over theintervening two-year period. Now, another two yearslater, State o the Nation 2012 distinguishes trends totrack where Canada is making progress, and to identiy

areas where Canada must devote greater eort towardsenhancing perormance. Understanding this picture con-tributes to advancing the national dialogue on science,technology and innovation, identiying avenues oraction, and generating the will to work together towardscommon goals.

Recognizing the critical importance o world-class science,technology and innovation to Canadas success, STICbelieves that Canada must strive not only or excellencebut or global leadership. Thus, in State o the Nation2012, or each indicator where we report internationally

comparable data we identiy those countries that are thetop ve global perormers. At the same time, we identiythe threshold that Canada would have to attain to breakinto their ranks and thus achieve global leadership ineach o those areas.

What We Measure

As in previous State o the Nation (SON) reports, 2012takes an in-depth look at Canadas perormance in threekey pillars underpinning the STI ecosystem: businessinnovation, knowledge development and transer, andtalent development and deployment.

Chapter 4 reviews Canadas perormance on the inputsto business innovation, including investment in: researchand development (R&D); machinery and equipment,especially productivity-enhancing inormation and com-munications technologies (ICT); and intangible assets.This chapter also considers recent rm perormance inattracting risk capital, and the diusion o new ideas andtechnologies through global linkages. Wherever dataavailability allows, we continue the eort initiated inSON 2010 to rene the analysis by examining perorm-

ance by industrial sector.Chapter 5 looks at knowledge development and transer,using bibliometric indicators and global university rank-ing systems to refect Canadas perormance in produc-ing and rening scientic knowledge. We then turn toindicators related to collaboration, contract research,licensing, and spinos to assess Canadas perormance intranslating knowledge into practical applications.

Chapter 6 provides inormation on talent developmentand deployment. It begins by looking at Canadas per-

ormance in secondary, college, and university (includingdoctoral) education, as the oundation or developingthe skills necessary or scientic discovery and innova-tion. In addition, we examine the education systemsperormance in preparing young talent to contributeully to an innovative, productive and competitiveeconomy, through work-integrated learning and busi-ness education. Given the greater internationalization othe STI enterprise, and the increasing mobility o talent,we also investigate Canadas experience in attractinginternational students and highly qualied immigrants.

We then turn our attention to Canadas perormance indeploying our talent to use it to ull advantage. On thisront, we look in particular at the countrys perormancein absorbing human resources in science and technol-ogy, particularly researchers, into the labour orce.


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As a preace to this in-depth examination o Canadasperormance in the three key pillars, Chapter 2 considers:the importance o science, technology and innovationto Canadas economic and societal well-being; the keyplayers in Canadas STI ecosystem; and the key trendsthat characterize STI in the modern world. This serves asthe oundation or the ensuing discussion o Canadasperormance. Chapter 3 examines Canadian undingor R&D in an international context. Particular attentionis devoted to government supportnot only ederalsupport but, new to State o the Nation 2012, provin-cial support, too. The addition o provincial data helps

provide a more integrated, whole-o-Canada picture oresources or R&D.

The Perormance Story

Looking at the three key pillars, the ndings in State othe Nation 2012 reinorce much o what was learned inState o the Nation 2010. The ndings demonstrate that,while Canada has much to celebrate in terms o ourknowledge and talent base, we still have much work todo beore we can truly run with the best and realizeCanadas ull STI potential.

Canada continues to benet rom a strong oundationbuilt on dual advantages o knowledge and talent.Canadas substantial investments in research in the

higher education sector have reaped signicant rewards,as the production and renement o scientic knowledge(refected in key bibliometric indicators) continues to becharacterized by vitality and high-quality. In 2010, as in2008, Canada (with a 0.5 percent share o global popu-lation) accounted or an impressive 4.4 percent o theworlds natural sciences and engineering publications.

Methodology

The indicators utilized in this report are based on the most readily and publicly available statistics o science, technol-

ogy and innovation activities. They draw rom a number o ocial statistical sources, notably Statistics Canada and

the OECD. Where data rom these ocial sources were not available, private and non-prot sector sources were used.

As there is typically a two-year time lag in data rom ocial sources, much o the data reported throughout this report

are or 2009 and 2010.

The methodologies underpinning the collection o ocial statistics are based on internationally accepted statistical

conventions as described by Statistics Canada, which are based upon the latest (2002) Frascati Manual: Proposed

Standard Practice or Surveys on Research and Experimental Developmentand the 3rd edition o the Oslo Manual:

Guidelines or Collecting and Interpreting Innovation Data.

Consistent with statistical conventions, data reported in the 2008 and 2010 editions oState o the Nation have been

updated in cases where nal data have been released to replace original estimates.

A number o indicators used in this report (e.g., business enterprise expenditures on research and development, or

BERD) are expressed as a percentage o the size o each countrys economythat is, gross domestic product (GDP).

This approach is a commonly used and accepted international convention, and allows the comparison o STI indicators

across countries o dierent economic sizes. As with many measures, such ratios are to be interpreted with some care,

as they could be infuenced by changes either in the indicator under examination (e.g., BERD) or in the relative size oeach economy (i.e., GDP) in the comparator group. Nevertheless, all other things being equal, such considerations do

not materially aect Canadas international rankings on the indicators cited herein.

In international comparisons, when statistics were not available or a particular country or the most recent year(s)

used in the gure depicted, the most recent data available or that country were used instead, rather than omitting

the country rom the comparison.

All data are in current dollars, unless otherwise noted. All data are in Canadian dollars, unless otherwise noted.




On the talent ront, as reported in State o the Nation2010, hal o Canadas adult population has a universityor college education, one o the highest levels world-wide. From 2006 to 2010, there was an impressive31.8 percent increase in the number o undergraduatescience and engineering degrees granted and a7.3 percent increase in the number o engineeringdegrees granted. At the doctoral level, Canada continuesto produce ewer advanced research graduates thanmany OECD comparator countries; however, thegrowth rate in the number o science and engineeringdoctoral graduates is encouraging, surpassing manycomparator countries.

Canada cannot aord to be complacent even in theseareas o relative strength. Other countries, especiallyemerging economies, are making signicant investmentsin their education and research systems, some o which

are beginning to bear ruit in improving perormance,especially with respect to the quantityo researchoutputs. This improving perormance in other jurisdic-tions is aecting Canadas relative position on a numbero knowledge and talent development indicators, andCanada risks erosion o its competitive advantage inthese areas. Maintaining and expanding our competitiveadvantage in knowledge and talent development is vitalto ensuring a strong oundation or science, technologyand innovation.

Canada also continues to ace challenges related toknowledge transerin eectively moving knowledgedeveloped in higher education institutions to companiesthat have the ability to absorb it and translate it intocommercially viable products and/or solutions to health,environmental and social problems. Anecdotally, we knowthat a great deal o knowledge transer is occurringon two eetin other words, through the movementand interplay o people. However, on the traditionalmeasures o licensing and creation o spino companiesrom universities, Canadas perormance is typically

disappointing, especially compared to that o theUnited States (U.S.).

Similarly, Canada continues to ace challenges in deploy-ing our talent to ull advantage to drive discovery andcommercialization. On this ront, Canadas perormancecontinues to be disappointing on two o the most tellingindicators o a countrys ability to deploy its innovationtalent to best advantage: the share o human resourcesin science and technology, and the proportion oresearchers employed in the private and public sectors.

As concluded in State o the Nation 2010, the greatestcause or concern continues to lie in Canadas businessinnovation perormance. Although we recognize thatinnovative activity is occurring that is not captured inocial data, it is nonetheless clear that Canadian busi-nesses are not suciently harnessing innovation to makecompetitive gains. In international rankings related tobusiness innovation, Canada continues to place in themiddle o the pack on most measures and, in some

cases, Canadas rank has declined. Canadas relativelylow business R&D intensity and limited availability oventure capital are areas o particular concern, as is thelarge gap with the U.S. in private sector investment inproductivity-enhancing ICT.

Underlying this mixed perormance story is the undingstory. The dollar value o Canadas total R&D undinghas declined rom its peak in 2008, while total undingas a percentage o GDP has declined continuouslysince 2001. This stands in stark contrast to most othercountries, whose gross domestic expenditures onresearch and development (GERD) and GERD-to-GDPratios have been increasing. The more recent declinesin total Canadian R&D unding eorts are attributablepredominantly to lower unding rom the private sector.


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These ndings, and more, are explored in greater depthin the succeeding chapters. The key elements o theperormance story are highlighted in the ollowing table,which provides summary comparisons o Canadas per-ormance across the 20 core indicators since the baselineo the State o the Nation 2008 report. These 20 coreindicators were identied by STIC in State o the Nation2010, to use on an ongoing basis to better enablebenchmarking, especially against comparator countries,on key measures o science, technology and innovation.

Canada has strong oundations on which to build, butwe must do better. All participants in our STI ecosystemhave a role to play in driving enhanced perormance toelevate Canada to the ranks o the worlds leading innov-ative economies, so that we might enjoy the economicand societal benets associated with realizing our ullSTI potential. All players in Canadas STI ecosystem

must embrace this responsibilityocusing our resourcesand eorts, looking to the lessons to be learned romglobal leaders, improving agility to take advantage oopportunities, and working in concert to allow Canadato run with the best.




For rankings, the Science, Technology and Innovation Council used all economies for which data were available.For most OECD statistics, this refers to OECD member countries and other key economies measured by the OECD.Performing sector refers to the sector of the economy that carries out R&D activities, while funding sector refers to the sector that pays for the R&D.For example, the business sector funds a significant amount of activities within the higher education sector.

S t a t e o f t h e N a t i o n : Summary and Comparison ofCore Indicators

State of the State of the State of the Change ChangeIndicators Nation 2008 Nation 2010 Nation 2012 201012 200812

Resources for Research and Development (R&D) and Innovation

Gross domestic expenditure on R&D (GERD)2.00% (2006) 1.92% (2008) 1.74% (2011)

as a share of Gross Domestic Product (GDP)

16th out of 17th out of 23rd out of

Rank 41 available 41 available 41 availableeconomies (2006) economies (2008) economies (2011)

GERD by funder (CAD millions) 2006 2009 2012

Business 14,874 14,148 14,067 Higher Education 4,574 4,824 5,404 Federal Government 5,226 5,959 5,838 Provincial Governments 1,467 1,661 1,681 Foreign Sector 2,252 2,120 1,960 Private Non-Profit 827 944 1,077

GERD by performing sector (CAD millions) 2006 2009 2012

Business 16,474 15,569 15,493 Higher Education 9,625 10,818 11,528 Federal Government 2,496 2,762 2,475 Provincial Governments 310 352 348

R&D financed by business, by sector (CAD millions) 2006 2009 2012

Business 13,947 13,113 13,107 Higher Education 808 896 863

R&D financed by federal government,by sector (CAD millions) 2006 2009 2012

Business 260 313 406 Federal Government 2,434 2,684 2,400 Higher Education 2,488 2,932 3,002

Direct federal government support0.02% (2005) 0.02% (2008) 0.03% (2010)to business R&D as a share of GDP

Indirect federal government support0.21% (2005) 0.22% (2008) 0.21% (2010)

to business R&D as a share of GDP

Intramural government R&D: share of GDP 0.19% (2006) 0.19% (2008) 0.18% (2011)

Business R&D and Innovation

Business expenditure on R&D (BERD)1.14% (2006) 1.04% (2008) 0.89% (2011)

as a share of GDP18th out of 21st out of 25th out of

Rank 41 available 41 available 41 availableeconomies (2006) economies (2008) economies (2011)

Business expenditure on machinery6.6% (2004) 6.6% (2007) 5.7% (2011)

and equipment (M&E) as a share of GDP

Business information and communicationstechnology (ICT) investment intensity(ICT investment as a share of N/A N/A 17% (2009) N/A N/A

non-residential gross-fixed capital formation)

9th out ofRank N/A N/A 20 available N/A N/A

economies (2009)

2.3% for mining andInformation technology (IT) services intensity quarrying; 7.9% for(in select industries) N/A finance and insurance N/A N/A N/A

(Year of data: mid-2000s)

3rd out of 27 for miningand quarrying; 7th out of

Rank N/A27 for finance and insurance

N/A N/A N/A

(Year of data: mid-2000s)

Venture capital (VC) investment as a share of GDP 0.13% (2007) 0.09% (2008) 0.09% (2011)


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Figures and rankings in the State of the Nation 2008 and 2010 columns may not always appear as originally reported.If data have been revised since the publication of those reports, the revised data have been used.N/A stands for Not Available.

Refers to data only available for Canada; all other data are international.

State of the State of the State of the Change ChangeIndicators Nation 2008 Nation 2010 Nation 2012 201012 200812

Trade in technology-intensive services Receipts N/A 42.1% (2009) 38.8% (2011) N/Aas a share of total commercial services receipts

Trade in technology-intensive services Payments N/A 39.4% (2009) 39.1% (2011) N/Aas a share of total commercial services payments

Number of cross-border trademarks N/A 28.6 (Average 200507) N/A N/A N/A19th out of 38

Rank N/A available economies N/A N/A N/A(Average 200507)

Direct resident trademark applications 17,719 (2004) 21,101 (2007) 20,449 (2010)

20th out of 17th out of 17th out ofRank 212 available 212 available 212 available

economies (2004) economies (2007) economies (2010)

Knowledge Development and Transfer

Higher education expenditure0.66% (2006) 0.68% (2008) 0.66% (2011)

on R&D (HERD) as a share of GDP

3rd out of 4th out of 9th out ofRank 41 available 41 available 41 available

economies (2006) economies (2008) economies (2011)

University-industry collaboration 14th out of 134 7th out of 139 15th out of 144

in R&D Rank economies (2008) economies (2010) economies (2012)

Total new licences for universities 524 new licences 537 new licencesand affiliated teaching hospitals

N/A(2008) (2009)

N/A

Talent Development and Deployment

Programme for International StudentAssessment (PISA) science, mathematics 2006 2009and reading (Score and Rank)

Science534, 3rd out of 57 529, 8th out of 74

available economies available economies N/A N/A N/A

Math527, 7th out of 57 527, 10th out of 74

available economies available economiesN/A N/A N/A

Reading527, 4th out of 57 524, 6th out of 74

available economies available economiesN/A N/A N/A

Percentage of 2564 year old47% (2006) 49% (2008) 51% (2010)

population with tertiary education

Rank 1st (out of OECD 1st (out of OECD 1st (out of OECDmember economies) member economies) member economies)

Growth in total number of degrees granted in tertiaryscience, engineering and all fields of study 200508 200610

Science N/A 28.00% 31.80% N/A N/A Engineering N/A 9.10% 7.30% N/A N/A All Fields of Study N/A 13% 5.40% N/A N/A

Total number of degrees granted in doctoral programs 2008 2010

Science N/A 1,704 1,928 N/A Engineering N/A 891 1,036 N/A All Fields of Study N/A 4,827 5,416 N/A

Researchers per 1,000 employment 2005 2008

All sectors N/A 8.2 8.5 N/A13th out of 12th out of

Rank N/A 35 available 37 available N/Aeconomies (2007) economies (2009)

Business sector N/A 5 5.2 N/A8th out of 9th out of


Government, higher education and non-profit sectors N/A 3.2 3.3 N/A19th out of 18th out of




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UnderstandingScience, Technology and Innovation

Beore looking at Canadas science, technology

and innovation (STI) perormance story, it is important tounderstand the context in which this story unolds. It isuseul to rst dene science and technology (S&T),research and development (R&D), and innovation,and to explain their importance to the economic andsocietal well-being o Canadians. In addition, we describethe key players in the Canadian STI ecosystem and thedistinguishing characteristics o the modern STI enterprise.

Defning the Concepts

Consistent with international practice, scientic andtechnological activities are taken to include the genera-tion, dissemination and application o new scientic andtechnological knowledge. For statistical purposes, theseactivities are broken down into research and experimentaldevelopment (i.e., R&D)the central activityandrelated scientic activities (RSA). RSA, perormed pre-dominantly by governments and their agents, includeactivities such as education support, technical surveys,statistical surveys, inormation services, special servicesand studies, and museum services.

The Science, Technology and Innovation Councils(STICs) 2008 and 2010 State o the Nation reports pres-ented the denitions used in the Frascati Manual(OECD2002) or R&D and the Oslo Manual(OECD/Eurostat2005) or innovation.

The OECDs Frascati Manual(2002) denes R&D toencompass three activities: Basic research is experi-mental or theoretical work undertaken primarily toacquire new knowledge o the underlying oundation ophenomena and observable acts, without any particularapplication or use in view. Applied research is original

investigation undertaken in order to acquire newknowledge. It is, however, directed primarily towardsa specic practical aim or objective. Experimentaldevelopment is systematic work, drawing on existingknowledge gained rom research and/or practical experi-ence, which is directed to producing new materials,products or devices, to installing new processes, systemsand services, or to improving substantially those alreadyproduced or installed.3

Whereas S&T activities, and more specically R&D,

involve the creation o new knowledge or technology,innovation requires the introduction o that knowledgeor technology into the marketplace, where value is cre-ated, or into an organization, where eciencies are gen-erated. The Oslo Manual(2005) denes innovation as:the implementation o a new or signicantly improvedproduct (good or service), or process, a new marketingmethod, or a new organizational method in businesspractices, workplace organization or external relations.4The main types o innovation are urther elaboratedas ollows:

Product innovation involves a good or service that isnew or signicantly improved. This includes sub-stantial improvements in technical specications,components and materials, incorporated sotware,user-riendliness or other unctional characteristics.

3 OECD Frascati Manual: Proposed Standard Practice or Surveys on Research and Experimental Development, Paris (2002), p. 30.4 OECD/Eurostat, Oslo Manual: Guidelines or Collecting and Interpreting Innovation Data, 3rd edition, Paris (2005), p. 46.

C h a p t e r 2 : Understanding Science, Technology and Innovation


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MFP rom 2000 to 2010. With respect to labour produc-tivity in the business sector (i.e., the weighted averageo all industries included in Figure 2-2), Canadian levelsover this time period ell rom 80 percent to 70 percento U.S. levels. Several industries, including oil and gasextraction, manuacturing, transportation and warehous-ing, inormation, and proessional and business services,saw declines in labour productivity levels relative tothe U.S. rom 2000 to 2010. On the other hand, otherindustries, including agriculture, orestry, shing andhunting; mining, excluding oil and gas, and supportactivities; utilities; construction; wholesale trade; retailtrade; and, other services saw their gap with the U.S.decrease over this period.

With respect to business sector MFP, Figure 2-3 showsthat the Canadian level over this time period also ell,rom 79 percent to 70 percent o the U.S. level, widen-ing the gap with the U.S. This is attributable to the actthat many Canadian industries saw a relative declineagainst the U.S. MFP level. Those industries that did notexperience a decline include: agriculture, orestry, shingand hunting; mining, excluding oil and gas, and supportactivities; utilities; construction; retail trade; and otherservices. Estimating MFP is complex, and using dierentapproaches can infuence the results. State o the Nation2012, like its predecessors, uses the same methodologyin estimating MFP or both Canada and the U.S.11

* FIRE is finance, insurance and real estate.

Source: Industry Canada updates of Tang, Rao and Li (2010) for STIC, based on data from Statistics Canada, the U.S. Bureau of Economic Analysisand the U.S. Bureau of Labor Statistics, December 2012.

F i g u r e 2 - 2 : CanadaUnited States Labour Productivity Comparison, 2000 and 2010(United States = 100)

Labourproductivity(2010)

Labourproductivity(2000)

United States

Canadasproductivityasapercentage

ofthele

velintheUnitedStates

Goods Sector Services Sector

Agriculture,forestry,

fishingandhunting

Oilandgasextraction

M

ining,exceptoilandgas,

andsupportactivities

Utilities

Construction

Manufacturing

Wholesaletrade

Retailtrade

Transportationand

warehousing

Information

FIRE,*Managementof

c

ompaniesandenterprises

Professionaland

businessservices

Administrativeandwaste

management

Educationandhealthcare

andsocialassistance

Arts,entertainment

andrecreation

Accommodationand

foodservices

Otherservices

(exceptgovernment)

WeightedAverage

0

20

40

60

80

100

120

140

11 A recent study by Diewert and Yu (published in the Centre or the Study o Living Standards International Productivity Monitor, Fall 2012,pp. 2745), while using Statistics Canada raw data, comes to a dierent conclusion. It estimates average MFP growth at 1.03 percent peryear over the 19612011 period. This compares to the ocial Statistics Canada estimate o 0.28 percent over the same period. The mainreason or the dierence seems to lie in the estimates o capital services growth used by the two dierent approaches.


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In general, labour productivity levels and their growth inCanada vary signicantly among industries. Figure 2-4shows that the 2010 labour productivity level in theoil and gas extraction industry was about eight timeshigher than that o the overall business sector, and theutilities industry was more than three times higher thanthat o the overall business sector. The mining and oiland gas extraction industry, however, showed a negativeannual average growth o -5.4 percent while the utilitiesindustry showed zero growth over the 2000 to 2010period. A number o industries experienced above averagegrowth, with the agriculture, orestry, shing and hunting,and wholesale trade industries leading the way.

Increased business investment in STI-related assets, suchas inormation and communications technologies and

advanced machinery and equipment, are crucial orimproving productivity. These issues are addressed inmore depth in Chapter 4: Business Innovation.

Employment Growth and Firm Creation

Evidence suggests that investment in STI can create newjobs and expand overall employment, although it maylead to substantial job shits across industries. By helpingrms to become more competitive and thereby access

new markets, STI is a key driver o rm expansion andemployment growth. STI also encourages the creation onew rms as an avenue or commercializing new prod-ucts and processes. New rms are a particularly impor-tant source o new jobs. In 2007, or example, rms lessthan ve years old accounted or over two-thirds o netnew jobs in the U.S.12

* FIRE is finance, insurance and real estate.

Source: Industry Canada updates of Tang, Rao and Li (2010) for STIC, based on data from Statistics Canada, the U.S. Bureau of Economic Analysisand the U.S. Bureau of Labor Statistics, December 2012.

F i g u r e 2 - 3 : CanadaUnited States Multifactor Productivity Comparison,2000 and 2010 (United States = 100)

Multifactorproductivity(2010)

Multifactor

productivity(2000)

United States

Canadasproductivityasapercent

age

ofthelevelintheUnitedStates

Goods Sector Services Sector

Agriculture,forestry,

fishingandhunting

Oilandgasextraction

Mining,exceptoilandgas,

andsupportactivities

Utilities

Construction

Manufacturing

Wholesaletrade

Retailtrade

Transportationand

warehousing

Information

FIRE,*Managementof

companiesandenterprises

Professionaland

businessservices

Administrativeandwaste

management

Educationandhealthcare

andsocialassistance

Arts,entertainment

andrecreation

Accommodationand

foodservices

Otherservices

(exceptgovernment)

WeightedAverage

0

20

40

60

80

100

120

140

12 J. Haltiwanger, R. Jarmin and J. Miranda, Business Dynamics Statistics Brieng: Jobs Created rom Business Start-ups in the United States,Ewing Marion Kauman Foundation (2009). Cited in OECD, OECD Innovation Strategy: Getting a Head Start on Tomorrow, Paris (2010), p. 24.(http://www.oecd.org/site/innovationstrategy/theoecdinnovationstrategy.htm)

http://www.oecd.org/site/innovationstrategy/theoecdinnovationstrategy.htmhttp://www.oecd.org/site/innovationstrategy/theoecdinnovationstrategy.htm


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The need to address environmental challenges, such asclimate change, air and water pollution, chemical con-taminants and hazardous waste disposal, is high on thepriority list o many governments around the world andhas motivated considerable investments in preventionand mitigation technologies. For example, technologicaladvances that allow or more ecient combustion, thecapture o emissions or substitution o ossil uels byrenewable energy sources aim to reduce atmosphericemissions, while advances in bioremediation and othertechniques have enhanced our ability to remove con-taminants rom soil and water.

Concerns over social challenges around ood securityhave driven research and innovation in Canada since theearly 20th century, when government scientists developedhardy new crop varieties that could fourish in theCanadian climate. Current work on genetically modied

crops aims to improve crop yields, while reducing theamount o ertilizer, pesticides and herbicides used.

The Science, Technology and InnovationEcosystem and its Key Players

Canadas STI ecosystem involves numerous players,including governments, businesses, universities andcolleges, nongovernmental organizations (NGOs),communities and individuals. The links among theseplayers are complex, multi-dimensional, dynamic and

continuously evolving. These links acilitate theexchange and creative deployment o the knowledge,capital, talent and other resources required or innova-tion. For example, the higher education sector may pro-vide new knowledge and talent; suppliers and customersmay provide crucial inormation about market demandand technical improvements; community associationsand NGOs may link to nancial, business and legalservices; and various levels o government may providea wide variety o nancial, knowledge and networkingsupport. While all o these players have important roles

in Canadas STI ecosystem, the most active sectors aregovernment, higher education (universities and colleges)and business.

Government Sector

Federal and provincial governments in Canada playsignicant roles in supporting STI by developing policiesthat create the environment in which STI can thriveand delivering programs that und R&D and innovationactivities.

In Canada, ederal and provincial governments arejointly responsible or the ramework conditions thatsupport the production o many o the inputs requiredor STI. Federal and provincial strategies to strengthenSTI include policies related to scal and tax systems,intellectual property rights and labour mobility; regula-tions concerning health, saety and the environment;and policies shaping competition, oreign investmentand trade.

Stable and predictable government policies are particu-

larly important to rms to enable them to better calcu-late the potential returns on investments in research,product development and process improvements.Regulatory regimes infuence the size, dynamism andunding o rms, the degree o competition they ace,their ability to appropriate the returns on their intellec-tual property, and whether new products and servicescan be released into the marketplace. Rigidities in labourmarkets can also make it dicult or rms to adapt tochanging market conditions and may hinder the reten-tion and redeployment o skilled personnel.

Framework conditions also impact R&D carried out inthe higher education sector and government labora-tories, primarily by providing the economic resourcesneeded to support this work, but also by encouragingSTI partnerships with the private sector. Intellectualproperty regimes also provide some incentive orresearchers to pursue potential commercial applicationso their discoveries and inventions.

The expansion o markets has been one o the maindrivers behind STI, as reductions in tari and non-tari

barriers and the liberalization o capital markets haveopened up new opportunities or trade and internationalinvestment. This has expanded markets or innovatorsand consumers, while acilitating the spread o know-ledge, technologies and innovative business practices.



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Provincial Programs Supporting Science, Technology and Innovation

Canadas provincial governments support science, technology and innovation through a variety o programs aimed at

stimulating business innovation, knowledge development and transer, and talent development and deployment.

These programs vary rom one province to another. A sample o these programs includes:

Alberta

The Alberta Innovates Connector Service, launched in 2010, is a ree, personalized service that helps entrepreneurs,inventors and companies with innovative ideas connect to Albertas research and innovation system. Supported by

Alberta Enterprise and Advanced Education, the Connector Service assesses business needs, acilitates introductions and

directs individuals to programs and service providers, including the Alberta Innovates corporations that oer technical

expertise, business services and unding. The Connector Service ocuses on the clientdetermining needs and priorities,

and making connections to the inormation, people, acilities or organizations required to move innovative ideas into

the marketplace. The Connector Service has been handling approximately 800 inquiries per year.

British Columbia

The British Columbia Innovation Council (BCIC), a provincial Crown agency, launched a province-wide Mentor Program

in January 2011 to improve the success o technology entrepreneurs through access to expert guidance and know-how.

Modelled ater the MIT Venture Mentoring Service, the program trains and accredits volunteer mentors who are matched

with entrepreneurs in the BCIC Venture Acceleration Program (VAP), a structured program designed to accelerate thegrowth o early-stage technology companies. VAP delivery partners include Accelerate Okanagan, VIATeC/Accelerate

Tectoria, Waveront, the Innovation Island Technology Association and Kamloops Innovation Centre. BCIC is working

with additional delivery partners to make these programs available throughout the province. BCIC reports that, as o

2012, more than 170 ventures have received mentoring rom the programs 115 active mentors.

Newfoundland and Labrador

The Research and Development Corporations Petroleum Research and Development (R&D) Accelerator Program aims

to stimulate R&D in the petroleum industry by unding, on a non-repayable basis, up to 25 percent o eligible R&D

costs, to a maximum o $5 million per project or up to ve years. The program targets industry-led projects and

leverages 75 percent or more o eligible R&D costs rom the applicant (the oshore supplier/technology provider),

oshore petroleum producers (collaborators/end-users), R&D partners, and/or other sources.

Ontario

The Ontario Research FundResearch Inrastructure (ORF-RI) program provides unding or inrastructure in Ontarios

publicly unded research institutes to support research and technology development. The Large Inrastructure Fund

component o the ORF-RI program assists institutions in developing their research strengths by investing in acilities

and bringing together researchers rom a range o disciplines, as well as technology experts and industry partners.

Quebec

The Fonds de recherche du Qubec provides support to basic research through provision o unding or collaborative

and inter-sectoral initiatives. For example, the Fonds de recherche du QubecNature et technologies Strategic Clusters

Program supports collaborative academic research in areas such as orestry, oceanic and Arctic studies, biology, health,

climate change, and inormation and communications technologies (ICT). Approximately 30 strategic clusters have been

created so ar, involving researchers rom, on average, six Quebec universities, as well as companies and governmentagencies in the province. Currently, more than 1,300 researchers rom universities, colleges, industry, and government are

associated with the clusters and contribute to the training o about 3,000 graduate students and 350 post-doctoral ellows.




A number o ederal and provincial programs support-ing research perormed by higher education institu-tions and industry complement one another. Examplesinclude: the tax credits that the ederal government anda number o provincial governments provide or eligibleR&D expenses; joint unding o the operating andcapital costs o some research programs; and support orlarge-scale research inrastructure such as TRIUMF (thesubatomic physics laboratory located in Vancouver).

Finally, the ederal government, through its science-based departments and agencies and their laboratories,engages both in R&D and in the related scientic activ-ities that support its regulatory responsibilities. With ewexceptions, provincial governments have not investedheavily in intramural government R&D.

To guide its STI investments, the Government o Canadaoutlined our broad priority areas in its 2007 science andtechnology strategy, Mobilizing Science and Technology toCanadas Advantage. The our priority areas are: environ-mental science and technologies; natural resources andenergy; health and related lie sciences and technologies;and ICT. To provide urther ocus, in September 2008,the Minister o Industry announced 13 sub-priorityareas, identied in the table below, as recommendedby STIC. In order to build critical mass in Canadaat aglobal scaleit is vital that the ederal government ocusgreater resources on these STI sub-priority areas, whileat the same time supporting the best ideas regardless oresearch area. The sub-priorities identied by STIC repre-sent areas where the government can leverage invest-ments to stimulate leading-edge solutions to health,environmental and social challenges and, at the sametime, develop practical applications that sustain anddeepen the competitive advantage o Canadian businessin these domains.

STI Sub-Priorities

(Recommended by STIC and Endorsed by the Government of Canada in 2008)

Priority Areas Sub-priority Themes

Environment Water: health

energy

security

Cleaner methods o extracting, processing and utilizing hydrocarbon uels,including reduced consumption o these uels

Natural Resources and Energy Energy production in the oil sands

Arctic: resourceproduction

climatechangeadaptation

monitoring

Biouels, uel cells and nuclear energy

Health and Lie Sciences Regenerative medicine

Neuroscience

Health in an aging populationBiomedical engineering and medical technologies

Inormation and Communications New Media, animation and gamesTechnologies Wireless networks and services

Broadband networks

Telecom equipment

Sub-priorities listed above are not ranked within or across categories.


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It is estimated that the three ederal granting coun-cils collectively unded approximately $516 million inresearch ocused on the sub-priority areas in scal year201112, or just under 22 percent o their combined$2.3 billion in extramural R&D expenditures that year.Specically, NSERC devoted approximately $255 million tothe sub-priority areas ($666 million to the our broaderpriority areas); CIHR about $255 million; and SSHRCabout $6 million ($63 million to the our broaderpriority areas). The specic amounts devoted to eachsub-priority area are detailed in appendix A.

This unding refects both responsiveness to researchersproposals and proactive targeting o sub-priority areasin research unding competitions. For example, the NCEprogram targeted the 13 sub-priority areas in its last twocompetitions in 2009 and 2012. As a result, six newnetworks were announced, with an NCE investment o

$141.6 million. These six networks covered the ollowingsub-priority areas: water; cleaner methods o extracting,processing and utilizing hydrocarbon uels; biouels;neuroscience; health in an aging population; and newmedia, animation and games.

The Canada Excellence Research Chairs (CERC) programis another example where granting council unding hasbeen targeted. Budget 2008 announced the creationo the prestigious program, to award up to $10 millionor 20 chairs over seven years to support universitiesin attracting and retaining world-leading researchersin the our priority areas o the S&T Strategy. Canadasinaugural 19 CERCs were announced by the ederalgovernment in April 2010. While the competition didnot explicitly target the sub-priority areas, the extentto which proposals addressed these areas was consid-ered when evaluating them or unding. Budget 2011announced urther ederal investment to appoint addi-tional CERCs, with new awards available under a secondcompetition that will be nalized by early 2014. Again,one o the criteria by which proposals will be evaluated

is the extent to which they t in one or more o thepriority and sub-priority areas.

Higher Education Sector

The higher education sector (universities and colleges)plays a number o important roles in the STI ecosystem,described by the OECD to include education, training,skills development, problem solving, creation and diu-sion o knowledge, development o new instrumenta-

tion, and storage and transmission o knowledge.13

Universities and colleges can anchor clusters o innova-tive activity in their local communities and act as bridgesbetween businesses, governments and other countries.

At the heart o the innovation process are the peoplewho generate the ideas and knowledge that powerinnovation, and then apply this knowledge and theresulting technologies, products and services in theworkplace and as consumers.14

Universities and colleges play a critical role in develop-

ing young talent, providing them with the specic skills,knowledge and trades to help them become productivecontributors to Canadas economy, and exposing themto the exciting potential o research and innovation.Universities and colleges also provide education oruture entrepreneurs and business leaders who areintegral to enhancing Canadas competitive advantageand improving productivity. Perhaps most importantly,these institutions impart critical thinking and problem-solving skills to young talent, as well as the adaptabilityand fexibility necessary or success in the global know-

ledge economy.Canadas universities and colleges also play a criticalrole in developing and advancing knowledge and itsapplication. Much o the knowledge underlying todaysinnovation resulted rom research conducted in thehigher education sector. While the link between researchand innovation is complex and the task o commercializ-ing new knowledge is extremely dicult and uncertain,advances in knowledge are necessary to most innovationprocesses. In high-technology areas such as ICT, biotech-

nology and nanotechnology, the basic research con-ducted by universities has been essential. The uncertain-ties and long-term horizon o this type o research andthe impossibility o capturing all o its benets make itvery dicult, i not impossible, or private rms to carry

13 OECD, Perormance-based Funding or Public Research in Tertiary Education Institutions: Workshop Proceedings(2010), p. 9.14 OECD, Key Findings, Ministerial Report on the OECD Innovation Strategy(2010), p. 9. (http://www.oecd.org/sti/45326349.pd)

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it out. These rms are, however, increasingly recogniz-ing the innovative opportunities that arise rom workingclosely with universities and colleges.

Through their research activities, Canadian universitiesalso play a critical role in linking Canada to the globalpool o knowledge, technology and talent. Through

research collaboration with oreign counterparts andthrough attraction o world-class researchers and schol-ars to their institutions, universities advance Canadasknowledge and talent advantages.

Business Sector

Firms constitute a undamental part o the STI ecosystem,as they translate new knowledge and technologies intojobs and wealth and practical solutions to health,environmental and social challenges. They carry outsignicant R&D o their own, patent and license new

knowledge and technologies and, most importantly,take that knowledge into the local and global market-place. Firms also enhance Canadas talent advantage byproviding training to employees and working collabora-tively with universities and colleges to oer internshipsand co-operative programs. Firms also und some o theR&D carried out in universities and colleges.

Large, established rms are able to nance signicantin-house R&D and are able to perorm the dicult andvery expensive task o translating potentially useul new

knowledge into goods and services that people buy.New and young rms are also important, as they otenexploit technological or commercial opportunities thathave been neglected by more established companies.

As noted above, rms also work closely with others inhigher education and government on a wide array oSTI activities. These partnerships include jointly und-ing research and research inrastructure with the publicsector, collaborating with universities and colleges todevelop and commercialize discoveries and addresstechnical challenges, and providing opportunities orhighly skilled personnel to unleash their potential.

Characteristics o the ModernSTI Enterprise

The global economy has become more integrated, andincreased competitiveness and challenging economicconditions have orced governments and rms to reduceexpenditures and look or more ecient ways to create

and commercialize knowledge and technology. Themodern STI enterprise is characterized by increasinginternationalization o activities and a related rise incollaboration, including open innovation, among dier-ent players and across national borders. These develop-ments impact Canadas pursuit o STI excellence.

Internationalization

STI is an increasingly global process. Firms are expand-ing their activities worldwide, not only as a way to enter

markets and lower costs, but also as a means to sourcetechnological capabilities, tap into local centres andclusters o knowledge, and gain access to highly skilledworkers. Multinational rms play a leading role in theglobalization o innovation, with close to hal o theworlds R&D expenditures accounted or by only 700rms. These rms have been a key actor in the emer-gence o global innovation networks.

It is not only rms that are engaged in global STI activ-ities. Modern ICT and increasing mobility, coupled withthe escalating costs and complexity o research, have

driven the increasing internationalization o the researchenterprise. Almost one-quarter o research articles in2010 eatured authors rom more than one country,up rom 10 percent in 1990,15 while many developedeconomies are host to many scientists who were bornelsewhere.

New global players are also emerging on the STI land-scape, with the increased presence o the BRICS coun-tries (Brazil, Russia, India, China and South Arica) in STIactivities. China alone accounted or almost a third o

the global increase in R&D between 2001 and 2006, asmuch as the increase in Japan and the European Unioncombined. It is important to note, however, that whilemany emerging economies have been investing signi-cantly in R&D, resulting in some improved perormanceon associated indicators, there is still scope or urtherimprovement in the quality and impact o the research.

15 U.S. National Science Foundation, Science and Engineering Indicators(2012), Chapter 5, p. 5-36.(http://www.ns.gov/statistics/seind12/pd/c05.pd)
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At the same time that R&D investment has grown, talentin both advanced and emerging economies has becomeincreasingly mobile, willing to ollow opportunitiesaround the globe and, in so doing, contributing to theinternational diusion o knowledge.

Collaboration

Collaboration and partnerships are important sourceso competitive advantage, within sectors and across theeconomy. As the complexity and costs o engaging inSTI have increased, so has collaboration between andamong rms and public sector researchers. Throughpartnerships, rms seek to stay abreast o developments,expand their market reach, gain access to a larger baseo ideas and technologies, and get new products tomarket beore their competitors. Data show that rmsthat collaborate spend more on R&D than those that

do not, an indication that collaboration is not simplya means to save on costs but a means to extend thescope o a project or complement rms competencies.In addition to increasingly sourcing external knowledge,rms also increasingly seek external partners to commer-cialize innovations that are not used internally. In mostcountries, collaboration with oreign partners is at leastas important as domestic co-operation, a sign o theormation o global networks o innovation.

As a orm o collaboration, some rms are increasinglyembracing open modes o innovation. In open source

innovation, the activities o both creating knowledgeand disseminating or commercializing it are open. Opensource innovation relies on communities o innovatorswho reely and reciprocally reveal their innovations toothers who subsequently build on these innovations.For companies, using open innovation as a businessstrategy can provide access to a larger base o ideas andtechnologies than available within the rm. By poolingwith others the development o knowledge, the costsand risks o R&D can be decreased, while the speedo knowledge development and acquisition can beincreased. As knowledge becomes more valued as aninput to production, and rapid advances in ICT enablegreater sharing o knowledge, open modes o innova-tion may gain greater currency in the global economy.

Collaboration between the private and public sectorsincreases the possibility that research in the highereducation sector will be relevant and applicable or thebusiness and government sectors. Private sector-ledclusters are especially eective at ostering researchcollaboration and partnerships, as they create a web ointerconnected companies, universities, colleges andresearch institutes. The need or increased collaborationamong partners o Canadas innovation system was oneo the key messages o previous editions o this report.Canadas perormance in this area is explored inChapter 5: Knowledge Development and Transer.

Conclusion

The three main players describedgovernments, uni-versities and colleges, and businessesorm the corner-stone o Canadas STI ecosystem. The chapters that

ollow look at the unding these players devote to STI,their perormance in terms o STI inputs and outputs,and Canadas success in developing and deploying thetalent that drives it all. The discussion not only gives asnapshot o where Canada is relative to its key competi-tors but where it has come rom. This evidence-basedanalysis serves to provide a comprehensive assessmento Canadas science, technology and innovation systemand benchmark Canadas perormance against that okey competitors, providing insights into Canadas rela-tive strengths and weaknesses.



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